Information Note - Walk from Exchequer Balance to General Government Balance

The ‘walk’ in gross terms

Due to the heterogeneous nature of the data sources used to compile GFS data the reconciliation is presented in net terms, i.e. taking the net receipts and expenditures for each set of accounts and combining these to consolidate the whole of general government. The GFS data that is compiled and published contains further details of receipts, expenditures and financial flows by the different parts of general government (i.e. central government, local government and social security funds) and these are aligned with the European System of Accounts (ESA) reporting framework in their presentation. To aid transparency we have conducted an exercise to disentangle the components of the walk in gross terms and these preliminary data are presented in Table 1. At the time the data were compiled full sets of income and expenditure accounts were not available for all bodies included in government and, therefore, the change in balance sheets is used as an approximation of their net transactions when necessary. This works for the purposes of the reconciliation as, in principle, the net lending/borrowing (i.e. surplus/deficit) in the non-financial account¹ is equal to the balance of the financial account. The income and expenditure levels presented below are non-consolidated.

Table 1: from Exchequer balance to general government balance 2020, € billions

*Sometimes referred to as non-commercial semi-state bodies 

Notes 

1. Exchequer Balance is the starting point in calculating the general government balance.
2. Financial transactions are comprised of loans granted and repaid and equities acquired or sold that are contained within the Exchequer balance. Such transactions have no impact on net worth and therefore do not affect the general government balance. Accordingly revenues and issues included in the Exchequer balance are deducted. Examples include loans to the Social Insurance Fund and Irish Water or equities acquired in international development banks.
3. Timing adjustments are made to Exchequer transactions to reflect the period in which the economic activity took place. This includes adjustments to the timing of interest payments and tax receipts.
4. Extra-budgetary funds The surplus/deficit of several extra-budgetary funds are included next. Included here are such funds as the Local Government Fund and the National Training Fund.
5. Non-market public corporations  see the Register of public sector bodies for the full list of agencies included here.
6. Local government balance is the combined balances of local authorities, approved housing bodies classified to the local government sector and non-market public corporations controlled by local authorities.
7. Social security funds comprises the Social Insurance Fund and any pension funds classified in general government.
8. Total sums the data in the rows above. The general government balance is calculated in the bottom right cell by adding the income data to and subtracting the expenditure data from the Exchequer balance.

Footnotes

¹ GFS are compiled from both the non-financial accounts – revenue and expenditure - and the financial accounts – transactions in assets and liabilities. In principle the balance in each should equal.

²The general government sector (S.13) consists of institutional units which are non-market producers whose output is intended for individual and collective consumption, and are financed by compulsory payments made by units belonging to other sectors, and institutional units principally engaged in the redistribution of national income and wealth.

Annex

Legal background

Government finance statistics are part of the national accounts frameworks and are compiled in accordance with the European System of Accounts (ESA). This accounting standard, consistent with the United Nations System of National Accounts, provides a harmonised set of definitions, accounting rules and classifications for the preparation of comparable macro-economic statistics by EU Member States.

European Union fiscal rules are enshrined in the Maastricht Treaty and require that government deficits and debt must be below 3% of GDP and 60% of GDP respectively. The rules are further elaborated by the Stability and Growth Pact. Council Regulation 479/2009 on application of the protocol of the excessive deficit procedure (EDP) legislates for the provision of this data by reference to ESA. Thus ESA is the legally binding conceptual framework for EDP.

General government definition

ESA provides a definition² of general government and in simple terms this can be thought of as any revenue or expenditure under control of the government or that is aimed at meeting policy objectives of the government. In practice, it is often more complicated and, in addition to ESA, Eurostat and experts from Member States have prepared additional guidance in the form of the Manual on government deficit and debt and further guidance notes on specific cases. The general government sector can be further sub-divided into sub-sectors as follows:

The Central Statistics Office publishes a bi-annual register detailing the composition of general government and forms the basis for GFS and EDP reporting for Ireland. 

CSO publication, 30 March 2022, 11am